Sound of Azure said:
In your campaign, do you have rules about what kind of characters are allowed? Are certain magic item types or technologies (smokepowder for instance) banned? Do you place other limits on PCs and NPCs due to them being culturally inappropriate for the setting?
Yep, plenty. No psionics at this time (plot point), no incarnum, and no martial initiates (shoehorning). No races above LA +1; not ECL mind you, LA. Nothing related to the Underdark (campaign world issue). The game takes place in the Forgotten Realms, so unless you are able to come up with a reason that blows my socks clear the heck off, that means you're restricted in regard of material from other settings such as Eberron. However, as a paralel, one of my players did indeed de-sock me quite throughly and was allowed to make the Shifter he wanted as a result, so I'm not made of stone on the issue.

The game starts on the Sword Coast, in Waterdeep, in midwinter; it is
your job to tell
me why your character is there. Want to be from Rashemon? Fine by me, but you're in Waterdeep here and now, come up with a reason. Want to be from Al Qadim? Fine by me, but you're in Waterdeep here and now, come up with a reason. Want to be a Lantanese cloistered cleric of Gond with a starwheel pistol and dreams of becoming a Techsmith? Fine by me, but you're in Waterdeep here and now, come up with a reason.
And all that's just an example. Placing restrictions that serve to aid the tone and flavor of the campaign are a perfectly fine thing. They can really help your players get into the proper mindset, actually. Lays down some ground rules so they're not left adrift in a sea of infinite possibility. That, of course, assumes you already have a theme and plot framework all ready to go, though.
I've been wondering about this somewhat. With the overall freedom of options available in the D&D game, it can occasionally be overwhelming for DMs to review and include everything. All those interesting bits and pieces you can get from the various supplements do pile up. For example, there'll be no Warforged Ninjas in my Selan campaign. Heck, Plate mail hasn't been invented yet in the game.
One of the best things a DM can do is learn how to say no without it being a personal affront. Like you said - there are a lot of options out there, and they grow by the day. If you want to include everything that is fine, but if you don't, that is equally fine. Neither choice is more correct than the other. *nod*
Is it a bad thing to restrict player choice to enforce a campaign's flavour? Or is it best to allow things in, and see how the campaign adjusts? Is there really a sense of entitlement in players?
Both are just dandy. Really they're two completely seperate ways of running your game. One says here is the set up, you adjust to it. The other says here is the set up, I will adjust it to you. In the end the best tends to be a happy medium somewhere between the two, give and take on both sides of the screen.
As for a sense of entitlement in players, that varies from person to person. I know none of my players assume that just because it's in an official book that they have access to it without DM approval, but I can't say one way or the other for someone else out there playing the game half a world away. *shrug*